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Friday, 11 March 2016

WHY FED. GOV. SHOULD NOT HAVE UNBUNDLED THE NNPC

Dr. Emmanuel Ibe Kachikwu

If the move
to overhaul the NigerianNational Petroleum Corporation (NNPC)
is based on the erroneous impression that the corporation is too big, then,
that is not plausible enough reason to embark on such complex exercise. The
problem with the NNPC is lack of transparency, opaqueness and abrasive
corruption that pervades the entire Nigerian system. Any talk about reforming
or overhauling the corporation should gear towards making it transparent,
efficient and profitable.

Caution must
be exercised in dismembering the NNPC to avoid putting a final death nail on
it. Reason is that our experience with unbundling of government establishments
in this country has not been impressive. The unbundling of the erstwhile Power
Holding Company of Nigeria (PHCN) into private generating companies (Gencos)
and distribution companies (Discos), has not achieved the desired result. As a
matter of fact, the power sector has been plunged into deeper crisis and
government is at a loss on how to handle the situation.

If private
power companies are unable to bring the desired change into the power sector,
how does anyone believe that unbundling the NNPC into 30 discrete companies run
by public servants would do magic? I don’t believe so. Government should
understudy how national oil companies in other countries are managed. Oil and
gas operations have international dimension, such that the way it is run in one
country is not entirely different from the others.

The Minister
of State for Petroleum and Group Managing Director of the NNPC, Dr. Emmanuel Ibe Kachikwu, the other
day, disclosed that a major overhaul was underway to unbundle the NNPC into 30
different companies. Dr. Kachikwu disclosed this at the Oloibiri Lecture Series
of the Society of Petroleum Engineers
in Abuja.

He said
government has started resolving the governance issues in the oil and gas
sector, adding that an overhaul had not happened at the corporation in the past
20 years. He revealed that the latest financial report of the NNPC for the
month of January showed that the corporation’s losses had reduced from over
N160 billion of some six months ago to about N3 billion.

Good
development, one might say, but how much was NNPC’s revenue in 2015? How much
did it earn in January/February 2016? Why does the NNPC always report about
financial losses without any mention of financial gains/revenues like other
national oil companies around the world?

That is
where the problem lies. There may be no way out of the entrenched financial
mismanagement in the NNPC when other sectors of the economy are equally rotten.
One can argue that the cleansing has to start from somewhere but it is
foolhardy to begin the experiment with the life wire of the economy.

Any
reform/unbundling that does not address the issue of transparency will be
meaningless. So, what framework has Kachikwu developed to instill transparency
in the corporation or are the new companies going to be old wine in new
wineskin?

Whereas,
some people think that the problem with the NNPC is its “huge” size, which is
not true, NNPC is nowhere near the biggest national oil companies in the world.
The biggest national oil company in the world is Saudi Aramco with 2015 revenue of US$478 billion, followed by China
National Petroleum Corporation with US$428.62
billion and Petro China with US$367.982 billion.

The question
about the revenue profile of the NNPC is out of this world; such information is
never made public like other national oil companies around the world. NNPC’s
revenues are hidden from the public. The only thing that Nigerians hear is the
amount that has been stolen and the empty probes to recover such funds.

Not long
ago, we did a comparative study on the operations of the NNPC and Petrobras,
Brazil’s national oil company. While the revenue profile of Perobras is
published on its website that of the NNPC says “no information.”

Since NNPC
is not among the biggest national oil companies that have, at the apex, one
president or managing director, why should anyone believe that having one Group
Managing Director (GMD) is the problem that has to be resolved by splitting the
corporation in 30 small companies, thereby complicating the matter?

We are
talking about how to reduce the bureaucracy that bedevils the NNPC; yet
somebody is thinking that having 30 quasi-independent companies that creates
more complex bureaucracy is the solution.

To begin
with, having 30 companies would mean having 30 CEOs, deputies, directors, etc.
At the end of the day, we might be talking about having over 200 new executive
offices with all the perks of office for a job that was done by one person. How
would you compare the overhead cost of having one GMD with having 30 and much
more? There are Nigerians that can manage a complex organization like the NNPC
and achieve positive results.

Moreover,
there is the question of who manages the new 30 companies. Dr. Kachikwu said, “We are going to bring in experienced hands.” Are the
experienced hands Nigerians or expatriates? Bringing in expatriates will defeat
the local content philosophy of the Federal Government? Besides, is the
unbundling in line with the prospect of having a new Petroleum Industry Bill
(PIB)? Another thing is the timing. Dr. Kachikwu said the proposed overhaul
“hasn’t been done in over 20 years.” Does it mean the overhaul is being done
just for the mere sake of it and not necessarily due to expediency?

Implementing
a major overhaul at a time when oil prices are down could have both positive
and negative fallout. Positive in the sense that it might be the right time to
test the professional capability of the new managers, but there could be
negative fallout when you bring new hands to steer the NNPC turbulent ship at a
most inauspicious time. The new hands might wreck the boat for lack of
experience on the terrain.

Whatever the
case may be, there is high expectation on the NNPC to do what other national
oil corporations are doing for their countries. The Ghana National Oil
Corporation that began a few years back has embraced international best
practice by publishing its revenue profile on its website. That shows
transparency in its operations. NNPC should do the same. Dr. Kachikwu’s
overhaul should focus on that. (Guardian)

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